Market Might Still Lack Some Conviction On Mobvista Inc. (HKG:1860) Even After 31% Share Price Boost

Mobvista Inc. (HKG:1860) shareholders are no doubt pleased to see that the share price has bounced 31% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 17% over that time.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Mobvista's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Media industry in Hong Kong is also close to 0.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Mobvista

What Does Mobvista's P/S Mean For Shareholders?

Mobvista certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on Mobvista will help you uncover what's on the horizon.

How Is Mobvista's Revenue Growth Trending?

In order to justify its P/S ratio, Mobvista would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 23% last year. The latest three year period has also seen an excellent 107% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 18% during the coming year according to the three analysts following the company. That's shaping up to be materially higher than the 11% growth forecast for the broader industry.

In light of this, it's curious that Mobvista's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Mobvista's P/S Mean For Investors?

Mobvista appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Despite enticing revenue growth figures that outpace the industry, Mobvista's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

It is also worth noting that we have found 1 warning sign for Mobvista that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.